House panel questions state housing officials over recent fraud

Gov. Tim Walz issued an executive order Wednesday morning directing state agencies to intensify efforts to prevent, detect, and combat fraud in state programs.

“If you commit fraud in Minnesota, you will be prosecuted and held accountable to the fullest extent of the law,” he warned. “While we will continue to urge the legislature to take further action, this executive order gives our agencies additional tools to safeguard taxpayer dollars.”

These include disenrolling inactive Medicaid providers and requiring prepayment review for high-risk providers, establishing a Statewide Inspector General Coordinating Council, and conducting an external review of Department of Human Services operations to recommend structural changes that prioritize fraud prevention, accountability, and efficient service delivery.

The announcement came before department officials appeared before the Republican-led House Fraud Prevention and State Agency Oversight Policy Committee regarding problems within Housing Stabilization Services and Integrated Community Supports.

Recent television reports by KARE and KSTP show the department failing to ignore signs of potential fraud and allowing millions upon millions of state taxpayer dollars to go to fraudsters instead of those the system is designed to help.

Launched in 2020, Housing Stabilization Services helps seniors and people with disabilities find and keep housing. Because of “significant program integrity concerns,” payment to 115 providers were stopped this summer and the program is scheduled to be shut down Oct. 20.

Rep. Dave Pinto (DFL-St. Paul) said part of the issue is with the “flawed design” in creating the program proposed by the Dayton administration and passed when Republicans controlled the House and Senate.

“It was simply too easy for providers to enroll in the Housing Stabilization Services program. The vetting in statute was you fill out some forms, pass a background check and essentially you can become a Housing Stabilization Services provider,” said James Clark, the department’s inspector general since March.

Compared to other Medicaid programs, he said provider eligibility in the program does not statutorily require “a lengthy list” of specific qualifications or requirements, such as mandatory training and education, being bonded or professional licensure.

The hearing occurred a day after Eric Grumdahl, assistant commissioner of Homelessness & Housing Supports for the department, was ousted from that position, a development that “stunned” Robbins.

“This is yet another example of DHS and the Walz Administration dodging accountability for their failures. I would have expected Assistant Commissioner Grumdahl to attend the hearing and answer questions today, but DHS never intended for him to come. While I’m glad to see they are finally starting to hold individuals running these programs accountable for fraud, doing it the day before the public hearing just shows how DHS tries to hide what is going on from legislators and the public,” Rep. Kristin Robbins (R-Maple Grove), the committee chair, said in a statement.

Due to employment law, Temporary Human Services Commissioner Shireen Gandhi could not provide additional information on the change.

No matter who is employed there, what has the department been doing to go after folks fraudulently taking money from the state? Republicans questioned why things like visiting addresses with multiple providers or other checks have not occurred.

“We need to know that people are doing their due diligence that our staff was able to do, that reporters have been able to do, that citizens have been able to do, that the department doesn’t seem able to do,” Robbins said.

Added Rep. Walter Hudson (R-Albertville), “We have a running car with the keys in it unattended and we’re surprised when it gets stolen.”

Clark said the Human Services Department has become “more aggressive” in going after fraud, including, since May 2025, proactively suspended payments at signs of fraud and notifying law enforcement.

[MORE: View the department’s PowerPoint presentation]

He suggested things that could be done to help fight fraud: better provider vetting, stronger requirements for Medical Assistance managed care plans, refined tools for data analytics, strengthening payment withhold authority, and enhancing internal controls.

Rep. Emma Greenman (DFL-Mpls) said the state is “very, very vulnerable” with so many services being outsourced to entities more focused on profit. 

“We need to think about how government could do this differently, how the public could be doing it differently so that publicly provided services are publicly accountable and potentially publicly provided. … We have to meet the needs of our communities that doesn’t create a vector for private sector fraud.”